Public Transport Expenses Could Be Exempt from Fringe Benefit

The Chamber supports the idea of the Parliament’s Rural Committee to exempt from the fringe benefit tax the expenses of employees on public transport between their place of residence and work. Such amendment would allow treating all employees and employers equally, helps to increase mobility of the labour force and would therefore facilitate to alleviate the lack of labour force.

According to the Income Tax Act, employers can compensate without the fringe benefit tax public transport tickets if the place of residence of an employee is at least 50 km from the place of work and the employee uses public transport to cover the distance.

At the same time, there are thousands of employees in Estonia who live less than 50 kilometres away and use public transport to go to work. In terms of these employees, the employer has no possibility to compensate to employees expenses related to public transport without the fringe benefit tax. For example, if a person lives in Keila and goes to work in Tallinn by train, employers have no possibility to compensate the price of the employee’s train ticket without the fringe benefit tax. However, if the employer orders a bus to bring employees living in Keila to their work in Tallinn, these expenses are at the moment exempt from the fringe benefit tax.

In the Chamber’s opinion, the law should allow employers to cover the costs related to the employees’ movement between their homes and work places by public transport as well as bus ordered by the employer without the fringe benefit tax. However, it is important to emphasise that that would entail an opportunity, not a possibility for the employer. In the Chamber’s opinion, such opportunity would not result in significant increase of the risk of abuse, because as a rule, the costs compensated are rather small.